Down, down, deeper and down; so no Status Quo then? The Insolvency Statistics for Q2 2015

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25

Aug 2015

Down, down, deeper and down; so no Status Quo then? The Insolvency Statistics for Q2 2015

…a little classic rock reference there for all our listeners at Radio PCR!

It’s that time of year and the “Stattos” of the Insolvency Service have just published their latest data on company and individual insolvency for the period April to June 2015. Of course, with stats, the devil is in the detail but it will come as no surprise that there continues to be a decline in the number of corporate and individual insolvencies. Company insolvencies have been on a decreasing trend since 2013 and were at the lowest level since Q4 2007 which was just before the start of the 2008 recession.

The corporate world is still full of “zombie” companies. These survive because lenders are not being aggressive in foreclosing on loans in default and historically unprecedented low interest rates means currently servicing debt (or the interest element at least) has been possible for many companies when they would have been expected to go to the wall; hence the low numbers of corporate insolvencies.

The rumoured interest rate rises may well be the straw that breaks the camel’s back and finally pushes the zombies over the edge but whether this leads to a huge leap in insolvencies will depend on the extent and timing of the interest rate charges and lenders ultimate appetite for crystallising the losses that would inevitably arise out of insolvency.

For us wage slaves low inflation, falling unemployment and wage rises in a benign economy have meant that people have found it easier to manage their personal finances. The huge fall in IVAs reflects this and possibly the fact that the insolvencies that arose out of the pre 2008 credit boom have now been dealt with. We should however be mindful that the stats do not reflect the number of people in informal debt management plans so the overall position might be skewed.

As with the corporates and perhaps even more so, interest rate rises may impact on personal finances particularly on those households with mortgage payments to meet. So Q3/Q4 may see the decreasing trend reverse especially as new rules making it more expensive to petition for a person’s bankruptcy come into effect and advantage is taken of the current lower costs.

Let’s see. In any event I’ll be back in November with the next quarterly update.